Could BlackBerry take the #3 smartphone vendor slot?

How often do you hear people talking about BlackBerry and the competition they face from Android? Plenty. Yet nobody actually sells an Android product in the store. They sell phones that use Android. We talked about this on CrackBerry Podcast #91 yesterday.

The trouble with Android is that very few smartphone vendors are making money from it. The list may be as small as one single name: Samsung. I say this because the world's #2 maker of Android phones, HTC, can't seem to make much money. Yeah, I suppose HTC is technically profitable, but their profits are are at the lowest point since 2006, when they first started making smartphones under their own brand.

If the world's #2 Android maker is struggling to make a profit on phones, how can other vendors expect to? This includes the Chinese vendors ZTE and Huawei. One can argue that Amazon is making a profit by forking Android and using its loss-leader devices to drive e-commerce. But that's another game altogether. And they're not making Amazon smartphones, yet.

Kevin talked about this in a recent interview with CNBC. Skip to the 3:20 mark if you want to get to the Android discussion in that interview. He correctly points out that "Android" doesn't have a relationship with carriers. Samsung and other vendors do. And it's really only Samsung who's doing a good job of it.

Let's look at the PC market to think of why this matters. When a customer wants to buy a new computer they decide, first and foremost, on the operating system they want. People are either in the Windows camp or the Mac camp. The numbers show that most people buy Windows PCs. Once that decision is made, they choose among commodity manufacturers such as Dell, HP, Lenovo, or whoever. The hardware makers fight for slim margins.

Apple has avoided that problem by controlling its own platform and making sure their products are beautifully designed and easy to use. BlackBerry has always owned its own platform too. This has served the company exceptionally well for a long time until they got caught not paying attention to where the market was headed. As the great Wayne Gretzky might say, they we're still skating to the puck instead of to where it was heading.

So now Research In Motion is correcting course. They're skating in the right direction and wooing developers. I don't think anything has changed in terms of the value of RIM owning their own platform. If they were to adopt Android they'd be another commodity player fighting against Samsung on very bad terms.

RIM needs to focus on differentiating from Samsung and Apple. That's it. They can essentially ignore HTC, ZTE and other Android vendors who are forced to compete against Samsung without much of a weapon.

Thankfully for investors, RIM doesn't need to beat Samsung. They just need to beat the other Android vendors. With their own differentiated platform, they are not fighting the same commodity battle. After Samsung and Apple, I think the #3 slot for hardware vendors is up for grabs over the next few years. Nokia has it now, but we all know it's based on dying Symbian sales. It won't last.

To stay relevant, Nokia has latched onto Microsoft's Windows Phone platform, but that hasn't saved them yet. And like building for Android, building for Windows Phone is a commodity game. Just look at Windows Phone 8. The battle has already begun and the phones are not even on sale yet. Nokia announced their new Lumia, followed days later by HTC announcing their own, followed by word that Microsoft intends to release their own Surface phone. It's hard to have a stand out device in the smartphone market -- one where you can hit high volume and economies of scale and really earn a profit -- when you're constantly battling vendors on your own platform to keep your name in the headlines.

So if RIM does a great job with BlackBerry 10 they don't only maintain their #3 position as a smartphone platform, but they could go after the #3 vendor position in the entire smartphone market.

Reader comments

Could BlackBerry take the #3 smartphone vendor slot?

" Yeah, I suppose HTC is technically profitable, but their profits are are at the lowest point since 2006, when they first started making smartphones under their own brand."

One reason: their customer service stinks. Phones have some rather serious battery/power issues. Had Sensation 4G and now One X and both suffer from random reboots, random complete shutdowns and extremely fast battery drain.

That's not a way to produce reliable phones that will sell in good numbers.

Woot amazing article Chris, well put and well addressed. 'Keep up the good fight", looks like the crackberry team is getting better and better at writing as well. I think one thing has to be addressed though, even though android's relationship with carriers is non-existent they still love them because of sale of other devices.

What RIM needs to do is leverage its existing base, something that windows doesn't have. I don't really buy everyones notion that there can only be 3 smartphone ecosystems. That argument only holds true because developers dont want to make apps for more than 3 devices, although as HTML5 and other cross platform programming becomes more popular and efficient I forsee more than 4 operating systems possible. Obviously another thing is support which is why it shouldnt go more than 6.

Anything is possible. If RIM can really market the BB10 exactly right and the. OS10 delivers. All the hype, slowly they could get into 3rd ecosystem. Those are some pretty high goals. For now, just lets see if new BB10 can live up to its hype.

First off, great article and it was nice to hear Kevin represent again, he did a great job in that interview and it will stand the test of time.

The one point that I would like to make is that we need to change the mindset of RIM/BB lovers/investors to that of, "Will BB melt away some of the current other phone lovers" causing them to switch back to, or for the first time, switch to BB for their smartphone needs. It isn't about completing for scraps as so many are suggestng, it's about capturing new customers and taking marketshare. RIM is not in this to become or hold the 3rd spot. They are clearly trying to win back BYOD and tip their toes into the retail market again. None of this spells taking number 3 away from anyone.

There isn't a company on the planet right now who is better equipped to regain marketshare than RIM. They are very successful without BB 10 outside of NA. They have a true PC experience in BB 10 coming and no one has that functionality in their phones today. I really believe that a year from now we will be looking at NA as a market with 3 major players tied in most respects, to close competition, not some ratio of 90% for the top two players and 10% for 3rd place. BB 10 could be looked at as on par with the majors and a challenge to the majors in as little as one year.

If I can switch from iPhone to a BB 9900 ...... think of how many consumers out there will be willing to drop iOS 6 and move to BB 10. I could kill to get my hands on a BB 10 right now.

The one thing I think is missing from this story is the fact that Google bought Motorola Mobility and now has all the pieces to control the whole device, from software to hardware, just like Apple and RIM. And I think the Motorola would arguably be another vendor that experienced success with Android, at least on Verizon. It will be interesting to see how the combo of Motorola Mobility and Google plays out going forward.

I think your getting it wrong. Motorola is and will continue to be a standalone company apart from Google, that's what Google said from the start that companies would be managed separated, nonetheless Google has changed part of the Business ex. Killed webtop, layoffs, but none of these actions change the way Android is as a whole. We have yet to see a Nexus made by Motorola or A Motorola smartphone with vanilla android.

The manufactures that are selling Android products have one main hurdle in being able to profitable sell their phones... they aren't selling iPhones.

The only thing the can do to compete is to sell the top of the line hardware with huge screen, really, really cheap (Samsung has the advantage here since they make most of it). Or sell average hardware cheap enough that carriers offer it for free, or consumers can buy them for $100-$200 without a contract.

Android does have it's "fanboys" and those that don't want to be locked into Apples way of doing thing. But if Apple had say three screen sizes and priced there product more aggressively... we'd back to the days when "Windows" left all the other OS in the dust.

There is a surprisingly good review of BB 10 in Trusted Reviews. It actually focuses on how BB will be different. The one real criticism is that the design of the tiles and menus is a little lackluster still.

Windows 8 starts with the problem that it is the third "new" Microsoft phone os in little over a year. Unsurprisingly developers and carriers must be nervous.

So yes, RIM has a chance. Meanwhile can we have a blanket term for iOS and Android? They need to be lumped in together because, like most obsessive enemies, they are increasingly the same from the average user perspective.

The handsets are sold at cost or a loss. The result is that carriers make more money selling Samsung, and therefore push Samsung devices. No one can compete that buys components from Samsung (which is most other manufacturers).

The recent win by Apple against Samsung, and earlier wins by Microsoft will increase the unit price of Samsung devices to carriers (not necessarily to consumers), and RIM will become more competitive.

Combine that with RIM's existing efficiency in network usage - increasingly becoming a factor - and RIM needn't settle for number 3. They can be number 1. Admittedly an outside chance but certainly a possibility.

I just wished they'd partnered with a major online retailer so their app store could match Apples.

No, Microsoft is not going to give up, they know how big this is and have ongoing high income from PC Windows to keep fighting. They will eventually gain a good share of mobile, and will eventually pass RIM in a war of attrition. RIM should be able to survive as a 4th ecosystem, we've had more than 3 for a long time, so why not?

Being a DISTANT number 3 isn't going to make you much money. To succeed, RIM or Microsoft will have to turn this 2 horse race (Apple and Samsung) into a 3 horse race. This means that BB10 or Windows Phone 8 WILL have to compete with iOS and Android, and be seen as an equally attractive alternative, while keeping costs in line. A tall order, to say the least, but it will be fun to watch.

A complete ecosystem, in competition with Apple, will give RIM a chance. Android is so fractured, and not easy for the non tech population to work with. (My GF hates the update from 2.3 to 4 on her Note) So, we have Apple, Android, and ??? Samsung controls Android number one, so RIM has a real shot to come up the middle ( to borrow a political phrase)

@Chris 100% with you with the "unique" differentiator.
But that leads me to a biggest picture.
I believe there's room enough for at least 4 major players (say - OS).
Depending on the region and/or "niche" each can target, I strongly suggest that the #1 consequence would be a better share of market sales. Practically this would result in a narrowed gap between brands/OSes, meaning being 3rd or 4th may not change that much from being #1, on the revenues side.

Can ya, can't ya be #3, #1 in your mother's heart, #25 your neighbor's, #465 and an irresponsible idiot to your ex-spouse, #4 and your former partner's best friend? Who knows until it happens.

Are we talking about market share in North America, UK and EU? Is that what really matters? What RIM needs to do is create the conditions necessary for victory . . . prepare the market for BB10, create a buzz by convincing the market that BB10 is where the puck will be (God knows, that Gretsky quote has been so over used), release more and more about BB10 can do, and for goodness sake don't release the first phone in March.

Chris, your argument about owning your own platform notwithstanding, Samsung has been successful in a market in the Android space. We really don't need one WP8 vendor to do the same and get traction before BB10 hits, and then have the Surface phone released at the same time as BB10.

Windows Phone has been called as BlackBerry's last nail in its coffin, by Ovum analyst Nick Dillon. Due to the reportedly increased levels of security and platform integration, Dillon expects Microsoft to succeed in the business and enterprise market, where RIM has held much of the space."

"I don't think anything has changed in terms of the value of RIM owning their own platform."

I do, and big time. With RIM abandoning their proprietary push email tech and moving to Microsoft ActiveSync, they're screwing the Enterprise business community -- the sector where they actually have paying customers for both hardware AND software -- in two ways:

1. ActiveSync doesn't sync as much data as does RIM's push technology when using Lotus Domino as the back end messaging system. So RIM is violating Rule 1 of business: Never take something away from a customer by downgrading a product. For those like myself who live by the ability to sync Memos, for example, RIM is abandoning our needs to fit in to a Microsoft world.
2. Coexistence: Companies who wish to support their legacy BB devices going forward will need to run two BES servers; a BES 6 alongside a BB10. This added expense will be the motivation for many CIOs to pull the plug entirely on BB and BES, and to move to an EAS-based BYOD environment, which will hurt RIM immensely.

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